Solar Mosaic, Kickstarter for solar aims high

One day it could be commonplace for a regular person to invest in, and make money by putting solar panels on rooftops. At least, that’s the idea behind startup Solar Mosaic, which has built a Kickstarter-style platform that’s starting to bring together peer-to-peer lenders who want to make loans for solar projects in underserved communities. Down the road, the company plans to offer ways to invest in solar roofs and provide a return, the same way you would invest in, say, a mutual fund.

Crowdsourced solar

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It’s crowdsourcing meets solar. Solar Mosaic Co-Founder Dan Rosen explained his company’s idea to me: “We harness the power of the crowds to finance solar projects and also to generate leads for solar developers.” Founded in October 2010 and funded by Spring Ventures and a group of angel investors, Solar Mosaic is in a beta phase right now, offering zero-interest loans for its first couple of solar projects.

Interested participants can make loans to the projects in the form of buying $100 “tiles” (disclosure: I bought one). Similar to Kickstarter’s model, for each project, a certain amount of tiles must be bought for the project to get fully funded. On Wednesday, Solar Mosaic is launching its first solar rooftop project, a 28.8 kW system, at the Asian Resource Center in Oakland, Calif.’s Chinatown. That project has sold 890 tiles out of 982, and Rosen tells me that hundreds of people are owners in the project.

When the project is fully funded, installed and providing power, lenders will eventually get their loan back. Why? Because a solar system can save a building owner money — in the case of the Asian Resource Center, it will save $112,684 over the life of the system. The building leases the solar equipment and enters into a contract for a fixed, low, electricity rate, commonly over about two decades. Solar Mosaic is working with solar lease provider Sungevity.

Solar Mosaic takes 5 percent of what was raised if the project is fully funded. The company says it has already raised $50,000 from the crowd and another $250,000 for projects from a celebrity investor, whose name the company isn’t disclosing right now.

Solar returns

Sometime in 2012, Solar Mosaic wants to kick its solar loan platform into a higher gear, offering financial products that can provide returns to potential lenders. Rosen says the company could provide returns on one- to three-year notes, and Spring Ventures Partner Nick Allen told me he thought the solar projects could one day provide something like a six-percent return. “How many people are happy with the one-percent return they get from their bank?” asks Allen. Rosen calls it “an exciting emerging asset class where people can invest money, create solar and do well.”

But to offer those types of money-making financial products, Solar Mosaic has to become registered to share securities with the public, which is an arduous, lengthy and expensive process. A couple of years ago, peer-to-peer lending company Prosper was shut down for a while as it went through the same process. Spring Venture’s Allen noted in a talk at the South by Southwest Eco conference that the registration process could cost around $1 million in legal and filing fees, and will need regular reporting as well.

Right now, banks are one of the major ways that solar rooftops get funded in the U.S. An installer like SolarCity will raise a several-hundred-million-dollar fund from a bank to provide financing options like leases to building and home owners for solar panels. The bank can get a good return on the investment over time — some estimate 12 percent. Some corporations are starting to see the money-making potential of solar rooftops, too, and Google (s goog) has created a $280 million fund for SolarCity, and a $75 million fund for Clean Power Finance.

As Clean Power Finance CEO Nat Kreamer explained to me once, solar roofs are a safe, predictable and reliable asset class. The costs, timelines and returns are pretty transparent and low risk, and solar panels have become increasingly commoditized.

Solar by us

Using crowds to fund solar takes this idea of solar as a safe asset class one step further. Lenders have “skin in the game,” so to speak, says Rosen, and are motivated to engage with the project and promote lead generation. Clean power is also something that inspires, and it lends itself to a Kickstarter-style platform — or as a Solar Mosaic PowerPoint presentation puts it: “Solar is viral, crowd funding makes it more so.”

A small amount of community-owned solar projects are cropping up in the U.S. and Europe. So-called community solar gardens are located within a town or city limit and serve a bunch of residents who either pay to own a piece of it or subscribe to the project without owning the equipment. Electricity from the solar panels goes to the grid and is sold to the local utility, which then credits the sale to the owners or subscribers of the solar garden. The credits then show up on each of their utility bills.

This method isn’t common in many areas because there aren’t systems in place for how the utility will split up the bill. Though, there’s a California Senate bill, SB 843, that would make community solar gardens easier to create in California.

Will solar one day be revolutionized by the same type of peer-to-peer platform that has created a massive opportunity for fund-raising for small businesses, authors and artists? Why not — solar panels are a community benefit that offer clean power generation and local jobs — so why not offer the group a way to share in the profits?

A great idea that will be huge once they figure out how to actually offer real returns. Evidence from European markets show consumers are happy with 4-6% return on investment from their home solar systems (based on feed-in tariffs)… much lower than cost of capital from professional solar firms. Given the very low risk of an operating solar asset, it seems like an fantastic personal investment as compared to the expected return from your mutual fund. The question is how to move from the Kickstarter of solar to the Lending Club of solar.